Update

Another Brexit term for the dictionary – Flextension agreed!

Peter Legge Peter Legge

Another Brexit term for the dictionary – Flextension agreed!

EU leaders and the UK government have agreed a ‘flextension’ to the Brexit process. 

To avert a no-deal Brexit tomorrow (12 April), EU leaders have agreed to delay the deadline for Brexit to 31 October 2019, with the possibility of an earlier exit if the UK parliament approves and ratifies the Withdrawal Agreement before then.

This this means the UK government has an additional period of six months to find a solution to Brexit.

What does this mean for business?

The new Brexit day is 31 October but the UK could leave the EU at any time before then if Parliament ratifies the Withdrawal Agreement.

The labour market may continue to tighten as EU immigration continues to reduce and many people choose to stick with their current jobs. Some businesses in the supply chain may be distressed as no-deal stockpiling followed by subdued demand stretches cashflow. 

EU customers may use the extension period to review their own supply chain and consider alternative suppliers outside the UK.

What can businesses do during the extension?

Businesses can navigate this uncertainty and use the extension period to protect, create and transform value by continuing to develop their Brexit resilience plans, such as:

Protect value: develop your Brexit resilience

  • Develop your Brexit contingency plan. If you don’t have one, use this additional time to create one. If you do have one, update it;
  • Develop your no-deal contingency plan;
  • Review the lessons learned from your initial Brexit planning;
  • Maintain communications. During a period of uncertainty, communicating with your customers, employees, investors and supply chain is key.

Create value: look for opportunities

  • Identify ‘no regrets’ decisions that will help you in any Brexit outcome, such as strengthening your employee offer; improving logistics and customs processes to reduce delays at borders;
  • Expand in international markets unaffected by Brexit;
  • Develop new products and services that respond to customer needs;
  • Identify M&A targets.

Transform value: build up your agility

  • Cut costs and streamline operations: how can you take 10% of cost out of your business?
  • Develop your ability to deploy people quickly to respond to new market conditions;
  • Be prepared for wider political change. Scenario planning to consider a range of different global and UK political outcomes and the impact on your business operations and strategy won't be wasted;
  • How can your governance and leadership team respond to events quickly? Scanning real time data and keeping strategy and plans under review will help.

Brexit may be uncertain, but we have seen that those who have planned for all eventualities are getting on with their business with confidence. Using our Brexit expertise the team can help you develop your Brexit plans as well as implementing risk mitigation, operational change and transformation projects across your business.

What happens next?

If an agreement is reached, Parliament will still need to legally ratify the Withdrawal Agreement (including the backstop) to avoid a no-deal scenario in the future. 

If the Withdrawal Agreement is ratified at any point during the extension period, it will come into immediate effect. The UK will leave the EU and the official transition period will begin. 

The EU will review progress in June and have included the condition that EU elections must be held otherwise the UK will leave the EU on 1 June 2019. 

What are the possible outcomes?

No-deal Brexit is still possible.

If Parliament can't reach agreement during the extension period, the UK could still leave the EU on a no-deal basis on 31 October. Considering the way the process has gone so far, this remains a distinct possibility.

Uncertainty will continue for some time.

MPs have been unable to agree anything over the last five months and this deadlock in Parliament may continue. A second referendum or an election could be required to move forward.

Politics will become more unpredictable.

Whatever happens we face increased and ongoing uncertainty, which will impact the business environment. The UK will likely be holding European Parliament elections on 23 May (unless a Withdrawal Agreement is ratified before then), which provides new and more extreme political parties with an opportunity to win seats. This may then carry over into the general election, which we can expect later this year.